Backtesting
Friday, December 21st 2018
EQ Derivatives interviews ORATS on pensions' options strategies
EQ Derivatives interviews ORATS on pensions' options strategies
Summary
ORATS has seen an increase in backtesting call selling overlays for large institutions and pensions, but creating strategies that work in a rising stock market can be difficult. ORATS uses a deep historical database of options information to work with clients and determine the best times for call selling based on market realities, resulting in returns better than the BXM and BXMD benchmarks.
It was great to talk with EQ Derivative’s Daniel O’Leary about how our pension fund clients are using options. Here is the link to the interview (requires subscription): Pensions Looking At Call Selling On Single Stock Exposures
ORATS has seen an uptick in backtesting call selling overlays for large institutions and pensions.
The difficulty is to help them create strategies that work in a rising stock market. Typical buywrite strategies do not perform well when the market is rising at 9% a year.
Take the BXM, the CBOE’s S&P500 buy-write index that sells calls on 30 day, 50 delta options. This index has under-performed the S&P500 returns by 44% since 2007 or 4.4% per year. The BXMD is the CBOE’s S&P500 buy-write index that sells more out-of-the-money calls than the BXM, on 30 day, 30 delta options. This index has under-performed the S&P500 returns by 13% since 2007 or 1.3% per year, better.
These indexes sell calls each month based on the their index mandates.
ORATS is able to bring to call selling strategies a more nuanced approach. Utilizing a deep historical database of critical options information, ORATS uses its years of experience to work with clients to determine the best times for various types of call selling based on market realities.
The result of ORATS strategies is returns much better than the BXM and BXMD benchmarks.
To find out more about our services, please contact us here with a description of your investment objectives. https://orats.com/contact
Disclaimer:
The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors.
All opinions are based upon information and systems considered reliable, but we do not warrant the completeness or accuracy, and such information should not be relied upon as such. We are under no obligation to update or correct any information herein. All statements and opinions are subject to change without notice.
Past performance is not indicative of future results. We do not, will not and cannot guarantee any specific outcome or profit. All traders and investors must be aware of the real risk of loss in following any strategy or investment discussed herein.
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Be sure to read the OCCs Characteristics and Risks of Standardized Options to learn more about options trading.
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